Is the real effective exchange rate biased against the PPP hypothesis?

We show that the use of the real effective exchange rate to test for purchasing power parity, as in Astorga (2012) and other studies, introduces a bias against finding evidence of PPP. The bias is illustrated using unit root tests applied to bilateral real rates.

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Year of publication:	2012-09-29
Authors:	Ventosa-Santaulària, Daniel ; Wallace, Frederick ; Gómez-Zaldívar, Manuel

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Type of publication:	Book / Working Paper
Language:	English
Notes:	Ventosa-Santaulària, Daniel and Wallace, Frederick and Gómez-Zaldívar, Manuel (2012): Is the real effective exchange rate biased against the PPP hypothesis?
Classification:	C22 - Time-Series Models ; F31 - Foreign Exchange
Source:	BASE

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